CORPORATE PRESENTATION Aguas Andinas S.A. MARCH 2014
01 OVERVIEW 02 CHILEAN WATER INDUSTRY 03 AGUAS ANDINAS 04 RECENT EVENTS 04 RECENT EVENTS 05 FINANCIAL PERFORMANCE
01 OVERVIEW
4 Aguas Andinas at a Glance Financial Highlights (1) Summary USD 2012Revenues: � Largest water utility in Chile and one of USD 761 595 US 761 million the largest in Latin America 2008 2012 � Provides services to over 6.8 million � Provides services to over 6.8 million 2012 EBITDA: USD inhabitants including the most densely USD US 481 million 481 380 populated area in Chile (EBITDA Mg.: Metropolitan 63.2%) 2008 2012 � High service coverage levels within its Region Concession 2012 Dividends: concession area and among the highest in USD USD US 224 million 224 202 the country X & XIV 2008 2012 � Natural monopoly Regions Concession � Operations under a mature and stable Sound Shareholder Base XIV regulatory framework, supported by a X sound macroeconomic environment sound macroeconomic environment � World class controlling � Non-expiring concession and ownership shareholders 75% of water rights � Suez Environnement is one of the leading water and sewage treatment players worldwide 56.6% � Agbar is the #1 provider of 50.1% drinking water in Spain 01 OVERVIEW (1) Nominal CLP at FX as of September 30, 2013 (502.97 CLP/USD)
5 Corporate Structure Shareholder Structure (as of 31 Dec. 2013) 75% Others 13.5% Corfo 5.0% IAM International 50.1% 56.6% Chile 22.2% Pension 50.1% Brokers Funds 7.0% 2.1% 100% 100% 53.5% 100% 100% 100% 100% REGULATED COMPANIES NON-REGULATED COMPANIES 01 OVERVIEW
02 CHILEAN WATER INDUSTRY
7 Consolidated Industry… The water industry in Chile is a consolidated and privately owned industry with annual sales of US 1.8 billion. Industry Background Industry Coverage Ratios 99.9% (DW) � In 1998, the Chilean Government began with the water 95% 99.8% (WT) industry privatization process 96.3% (S) 75% � Aguas Andinas was privatized in 1999, being one of the � Aguas Andinas was privatized in 1999, being one of the few players to be awarded a non-expiring concession 55% � Currently, over 95% of the population is served by 35% privatized companies 15% � Stable and growing sales � Industry annual turnover of around US1,500 million Drinking Water Sewage Wastewater Treatment Market Share by Controllers Industry Revenues (USD Millions) 1.671 1.817 AGBAR SUEZ 43.0% 1.394 1.437 1.535 1.542 ONTARIO TEACHERS PP ONTARIO TEACHERS PP 31.1% 31.1% 1.245 1.010 1.104 MARUBENI 9.4% 924 INV. AGUAS RIO CLARO 5.0% 834 SMAPA 4.0% 502 469 453 747 378 351 GRUPO LUKSIC 3.3% 394 306 299 255 242 HIDROSAN-ICAFAL-VECTA 2.6% OTHERS 1.6% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: SISS Revenues Capex Number of clients as of December 2012 FX as of December 31, 2012 (CLP 478.6 / USD) 02 CHILEAN WATER INDUSTRY
8 …with a Proven, Stable and Transparent Regulatory Framework The regulatory framework for the Chilean water and sewage industry has proven to be robust, stable and transparent, providing a predictable and unbiased operating environment Clear and Stable Regulation Model Company vs. Real Company � More than 20-year old regulatory framework � More than 20-year old regulatory framework Model � Superintendency of Sanitation Services (SISS) acts as the Company regulator counterpart in tariff setting process, which lasts 1 year Greenfield Operation Existing infrastructure � Tariffs are reset every five years, based on an objective and technical model: Combination of new and legacy � Tariffs are calculated based on long term total costs of Latest technology technology a model company � Company and regulator have equal roles in the tariff Cost efficiency Real costs calculation process � Discrepancies are solved by an independent experts 100% coverage in all services Real coverage committee � Minimum real return on assets of 7% after taxes Self financing of Self financing of investments investments through tariffs � Automatic interim adjustments linked to polynomials through tariffs based on CPI and WPI indexes Minimum return Ability to use debt to finance Capex � Very low delinquency levels due to the legal empowerment on capital and enhance return on equity to disconnect clients � Government subsidies for low-income clients 02 CHILEAN WATER INDUSTRY Source: SISS, Company
03 AGUAS ANDINAS
10 Integrated Management of the Water Cycle Our goal is to consistently provide customers with safe, high quality drinking water and reliable water and wastewater services. 1. Untreated Water Abstraction and Drinking Water Production � Extracted from both superficial and underground sources 4. Sewage Treatment and 2. Drinking Water Storage � 100% coverage in drinking Restitution to the Environment water and Distribution � Water is transported to � Treated water is regulation tanks to ensure returned to its natural suitable pressure and environment in continuous supply optimum conditions � 14,980 km distribution � sewage treatment network coverage: 100% (2012) 3. Sewage Collection 3. Sewage Collection � Waste water is disposed through sewers to the sanitation plants � Collection Network: 12,234 km � 98% sewage collection coverage Aguas Andinas’ high coverage levels for all water and sewage services provided ranks the Company as a world-class operator 03 AGUAS ANDINAS
11 Sewage Collection, Treatment and Restitution Efficient Collection and Treatment Facilities � Collection network with a consolidated coverage of 98%. � The length of the collection network is 12,234 km. � Sewage Treatment plants � Sewage Treatment plants � Metropolitan Region: 3 large plants, El Trebal - Mapocho (2001 and 2012) and La Farfana (2003), and 11 minor plants, which as of December 2012 treated 100% of the Metropolitan Region’s sewage effluents � X and XIV Regions: 28 minor plants, which as of December 2012 treated 100% of these Regions’ sewage effluents Metropolitan Region Sewage Treatment Evolution (1) Restitution to the Environment Treatment Plants Treated Biosolids Biogas Water � Irrigation � Nutrients � Renewable Energy � Soil Recovery 03 AGUAS ANDINAS (1) Source: Company filings and SISS Annual Reports
12 Non-regulated Businesses Aguas Andinas has successfully leveraged on its deep knowledge of the water industry to develop additional businesses that provide a growing source of cash flows � Chile’s largest operator of treatment plants for liquid industrial waste � Operation agreements with medium and large Chilean companies � Serves large customers across all industries, including: mining; paper; consumer & food � Environmental analysis services focused on water, wastewater, sludge soil and air analysis � Mobile laboratory operations and support across all country � Focused on water, bottling and healthcare industries � Historically focused on the sale of materials for construction of sanitation projects � Purification and sale of biogas Non-regulated businesses accounted for 10.5% of Aguas Andinas’ 2012 Revenues (1) (1) Including non-regulated revenues related to the water and sewage business, such as construction of new connections to the distribution and sewage networks, maintenance and repair of third parties water and sewage pipes and construction and engineering services. Does not include revenues related to the Alto Maipo Hydroelectric Project 03 AGUAS ANDINAS
13 Public Perception of Aguas Andinas � Icare Prize 2012 “Company of the Year” What company do you consider to be the best? 46,4 � 10th Annual Summit Santander/Capital Magazine: Greatest Value Creation 2012 (utilities sector) 18,0 15,1 8,4 6,9 5,2 Aguas Mobile Electricity Telephone Gas None Andinas Phone Source: Adimark GFK – August 2013 03 AGUAS ANDINAS
04 RECENT EVENTS
15 Drought � 2013 was the fourth consecutive dry year with low water flow in rivers. � El Yeso Reservoir has been used to meet the demand when the volume/flow of the river is low. � Although 2013 was dry, the water level in the El Yeso Reservoir has increased, as of March 2014, to approximately 170 hm 3 (maximum capacity of the reservoir is 220 hm 3 ). hm (maximum capacity of the reservoir is 220 ). � Considering the current water level of the reservoir and the rate of thawing of surrounding snow/ice pack and the various measures implemented by the Company, water supply for 2014 will be covered. El Yeso Reservoir October 2011 March 2014 Approximately 30% of capacity Approximately 77% of capacity 04 RECENT EVENTS
16 Tariff Negotiation Process Calendar Mechanism for Tariff Negotiation Process 12 months (minimum) SISS study of Company study model company of model company 2 Months Discrepancies 1 5 Months 1a Negotiation 4 Months 45 days Agreement? 1b 2 1 Month No Yes 3 4 Expert Tariff Decree Committee 1. Publication of preliminary bases (October 2013) 1 a. Observations/comments of preliminary bases (December 2013) 1 b. Publication of definitive bases 2. Exchange of model company studies 2-3. Negotation 04 EVENTOS RECIENTES 3. Tariff Decree 4. New tariffs are applied
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